A Preview of the New Legislative Session from Rep. Kevin McCarthy

Borg: Settling in. State legislators moving into the state capitol for convening a new legislative session. A preview and perspective from Democratic leader Kevin McCarthy on this edition of Iowa Press.

Funding for Iowa Press was provided by Friends, the Iowa Public Television Foundation; the Iowa Bankers Association for personal, business and commercial needs. Iowa Banks help Iowans reach their financial goals; and by the Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure; by PolicyWorks, a public and government affairs team offering lobbying, grassroots and advocacy services to help you meet your strategic public policy needs. Information is available on the Web at www.policyworksllc.com; by Iowa's private colleges and universities, enrolling 25% of the Iowa higher education enrollment and conferring 44% of the baccalaureate and 40% of the graduate degrees in the state. More information is available at www.thinkindependently.com.

On statewide Iowa Public Television this is the Friday, January 11th edition of Iowa Press. Here is Dean Borg.

Borg: At ten o'clock Monday morning the speaker of the Iowa House of Representatives, Dubuque's Pat Murphy, gavels that chamber to order at the 82nd Iowa General Assembly second session scheduled for 110 days. Tuesday morning this coming week Governor Chet Culver comes up to the newly convened session presenting his annual Condition of the State address. Representative Kevin McCarthy leads the majority Democrats in the House of Representatives. He is with us today for a preview of the legislative session as he sees it. Welcome back to Iowa Press.

McCarthy: Thank you for having me, Dean.

Borg: And across the table two veteran statehouse journalists, Des Moines Register political columnist, David Yepsen and Associated Press senior political writer Mike Glover.

Glover: Majority leader McCarthy, one of the first issues you're going to face when this session convenes is the whole issue of financing the state's transportation network. Studies have shown it's about 200 million dollars a year short. How do you deal with that?

McCarthy: Well, first of all it's 200 million dollars over time is what we're going to need to plug that shortfall. We had a convention this week, the Associated General Contractors where the Republican leaders and the Democratic leaders visited with all the road folks in the state but it was no disagreement that we're going to tackle that issue this year. The gas tax will not be a part of that equation this year and both sides understand that to be so, so the gas tax will not be a part of that equation this year. We probably will be addressing, it's fairly likely we will be dealing with the equity between pickup trucks and vehicles and it looks like we will be trying to tackle that issue. When we do that sort of approach to get road funding with the pickup trucks and we look at registration fees or some license fees what we're going to try to do is craft things in a way that don't hit Iowans' pocketbooks immediately. In other words, we want Iowans to be able to make knowing and voluntary decisions moving forward such as dealing with pickup truck registration, in equity they pay $65, well, Mike Gronstal's Geo Metro he pays $200 or $300 for his registration, but we do it perspectively. And over time, depending on what formula you put together, you get to the eighth or tenth year you're generating a type of revenue you need to complete Highway 20 and do all the ...

Glover: Help me out here, mister majority leader, you're going to raise pickup fees but not immediately, down the road? How does that work?

McCarthy: Well, this is partly above my pay grade but people that are experts in this funding system they have presented three different proposals to us. This was as recent as last week for the road lobby. And they have analyzed the type of money that each one of the different formulas brings in, all three of the different formulas are satisfactory to them, it is just plugging the different amounts in. But it's over time you get to the amount you need.

Yepsen: Okay, you mentioned two things, one is you end the disparity between pickup truck registration fees and other motor vehicles and the second thing you do is increase vehicle registration fees?

McCarthy: Yeah, probably what we're going to do that makes the most sense that generates quite a bit of money as you move forward is right now when you purchase a new vehicle like a Ford Taurus you may be paying whatever is it, $300 for your registration and then as it gets older it gets less and less and less and less all the way down, if it's old enough, all the way down to I think it's $8 if you drive it long enough. We probably will establish a floor so as your vehicle gets older it stops at a certain point and that registration fee continues because you're continuing to drive on the roads, older cars beat up the roads just as much as ...

Yepsen: And besides those two things anything else in this package?

McCarthy: I visited with minority leader Rants yesterday, we are actually going to sit down with the transportation committee people and the Senate leadership sometime probably the second week of the session knowing that those two things are probably likely to be a part of the formula and then the rest of it is up on the chalkboard and we're going to pick from these three proposals and get consensus and go get the votes and get it passed.

Glover: And how much does that bring in?

McCarthy: Well, we're trying to get you up somewhere around $160 to $200 million dollars, in that range, that's our goal to get as close to $200 million as possible.

Yepsen: Is the gas tax increase going to be an issue in the November campaign? The Governor has suggested that it be put out there the way the cigarette tax was in the last campaign.

McCarthy: The gas tax, well it's not going to happen so I don't see it being an issue in the coming campaign. I don't see the reverse being true somebody saying let's defeat this XYZ legislature because it wouldn't increase but the gas tax is when gas is $3 a gallon.

Glover: The question being just like in the last campaign Governor Culver, then candidate Culver, campaigned on increasing the state cigarette tax to improve healthcare. Is it time to campaign for an increase in the gas tax to fix a transportation system that is short?

McCarthy: There may be some legislators particularly that want to see Highway 20 completed that could make that sell in their community. I will tell you in the various community forums I've been involved with because of the war in Iraq, because of the high price of oil right now therefore we're paying a lot for a gallon of gas it's not something that is very popular right now.

Yepsen: On another issue, infrastructure issue, prisons. The state needs a new prison. How are you going to pay for it?

McCarthy: I don't want to get too hyper technical here but we're likely to build a new prison in Fort Madison, set that in motion this year, also, largely a new facility in Mitchellville, I'm sorry, the women's facility and a major expansion of community based corrections, somewhere in the $230 to $240 million dollars. That will require ascent of general fund money this year. We have bonds right now for the Newton and Fort Dodge facility that are expected to expire in 2015. If we enter into prison bonds for the construction of these new facilities we could do some sort of interest only payments for the next few years and then have the -- when the bonds for Fort Dodge expire which is taken off the top of court fines that are collected we could then use those, continue those on for the Fort Madison facility and also the tobacco settlement money that comes into the state. We've already securitized 78% of it in years past. We're likely to securitized at least some portion of the remaining -- if you use securitized tobacco settlements for infrastructure they are tax exempt bonds, capital bonds and the formulation of bonding, the tobacco securitization, interest only payments, that's what we're going to do.

Glover: You're going to replace the facility at Fort Madison, you're going to renovate the women's prison at Mitchellville and you're going to expand the prison at Newton in addition to communities?

McCarthy: Newton and Fort Dodge I was using those examples because we have bonds out for them right now

Glover: So, how many beds are you adding?

McCarthy: I don't have a number yet. Probably not a whole lot at Fort Madison although we probably will have to have a little bit. I mean, we are overcrowded there, that's for sure. But to be smart as we talk about things related to sentencing reform, that and this other sentencing reform, is giving some folks who are non-violent offenders who would be warehoused in a prison, getting them into community based correction settings.

Borg: That community based, is that likely to be new areas or expansion of current community based prisons?

McCarthy: It looks like largely expansion of current facilities. You know, you get into a lot of controversy when you put a facility like that into a new location, those that are settled and having jobs there locally, the community kind of accepts that so we're looking at probably largely expansion of existing community based facilities.

Yepsen: Some are suggesting that you weaken prison sentences, that one way to solve this prison crowding crisis is to just let people out of jail earlier and they call it sentencing reform. Is the legislature going to do that?

McCarthy: No, none of that this year. We may do some things to make our code smarter the following year because we have set in motion -- during the 1970's we had the criminal code re-write, it was two solid days of debate -- we set in motion last year a two-year committee called the criminal code re-write committee to come back with a global recommendation for '09 but that would not be on the agenda for '08.

Borg: Another revenue stream I'd like to explore here is commercial property tax. A lot of discussion, a lot of pressure for renovating and overhauling and changing that commercial property tax levy and structure. Is that going to happen this year given the fact it's complex and the second factor is revenue isn't that great and if you interrupt that flow of revenue is it going to happen?

McCarthy: We're going to get commercial property tax relief sooner or later. We have a little bit of breathing room and pressure on us and here's why, the leading proposal to change the structural formula right now is to tie all four classes of property together. Well, Iowa has experienced and is going to experience likely for the next three years extreme agricultural productivity. Because of the way the formula works you could tie all four together, for the next four to six years you get zero commercial property tax relief. So, that proposal, for example, minority leader Rants has put forward to tie all four together gets you no relief in the short-term. So, that allows us to step back and say alright, if we do that in the future and that may be something we do, what can we do in the short-term to get some more immediate relief? The interim commission that has been studying this issue is a formula that they are finalizing their proposal which will largely be in the form of voluntary pilot projects that would allow some local governments in exchange for the limitation of future growth some alternative revenue sources, maybe from a collection of fees from non-profits, for example, tied to a minimum of 50% or 50 cents on the dollar up to 90 cents or maybe even dollar for dollar, it depends, to get immediate commercial property tax relief back into a local area. Whether the votes will be there for that sort of pilot project I don't know but I do know some of the business groups are starting to sign onto it and Cedar Rapids has kind of led the way on this.

Yepsen: Let me make sure I understand you. You're saying charging fees in lieu of taxes to more non-profits is going to be the way you'd pay for this?

McCarthy: At least as a short-term solution before we deal with the larger structural formula. One of the reasons this kind of came up is a lot of people said look to Sioux Falls, South Dakota, they have low commercial property taxes there, they have low property taxes there, look at Sioux Falls. What are they doing? Well, first of all, per person spending for the city of Des Moines is above $600, the city of Des Moines spends $600 per person, Cedar Rapids spends about $450 per person for the city budget, Sioux Falls, South Dakota spends $857 per person. We don't want a government like that but the point is they are collecting a variety of user fees for their services and so that begs the larger question, what should property tax be paying for at the local level? And the Sioux Falls, South Dakota analysis has been instructive as we look to funding some of these pilot projects.

Borg: Is Cedar Rapids at the head of the line as a pilot city?

McCarthy: Well, they led the effort in generating this discussion at the community level, the city of Des Moines has as well.

Glover: Another issue that has surfaced in recent months is the issue of federal deductibility, suggestions that the legislature could eliminate the ability to deduct federal tax payments with cascading state income taxes and use that money to re-jigger the income tax system. Is that possible in an election year?

McCarthy: The blunt answer is no, we will not be doing that this year largely because we talked about educating people on the gas tax issue, the public has not been educated on the issue of federal deductibility, it's overwhelmingly popular and we as elected officials have to do a better job of explaining why our tax code looks uncompetitive around the country. That case has not been made yet.

Glover: Is that part of the next election?

McCarthy: I don't know, it could be. Doubtful to be frank with you given all the other issues that are on the table.

Yepsen: So, we're to ignore that part of the Democratic platform as Democratic legislators see re-election?

Yepsen: Another issue that is in front of the legislature is the question of taking the local option sales tax for schools which has been passed in 99 counties and turning it into a statewide tax. Where does that issue stand? What are the prospects for that?

McCarthy: I've kind of been converted on the issue to be frank with you. I wasn't too big a fan of the concept last session when it was presented to us very late. But looking at the issue here is the question I pose to let's say minority leader Christopher Rants from Sioux City whose district is the most effected by the inequity. Everybody there is paying a penny on the dollar, you're going to pay a penny on the dollar moving forward for the next three years one way or the other you're either going to be treated unfairly or you're going to be treated fairly. What do you want to be treated given that you're going to be paying this penny on the dollar? And so my school district is the Carlisle school district, very inequitable situation for them vis a vis West Des Moines, for example. So, if you replace a local penny for the state penny that's not a tax increase. And then what I say is let's work in a bipartisan way. Most of the districts that are affected are Republican districts, to be frank with you, with the inequity in the formula. Let's have a blank chalkboard, let's sit down and say if we flip the local for the state penny we're open to make sure that we have bipartisan support for this bill. Do we put a sunset on it, maybe twelve or fifteen years? Make sure we don't affect the local districts or they'll lose a bond? Do we dedicate a portion of the property tax relief, dedicate it solely to infrastructure, which is what I would prefer? We're open to do it in a way to get bipartisan support to solve this problem.

Yepsen: How do you deal with the concern that some people have? First of all, it is going to be a tax increase on things like motor vehicles, those don't pay it now.

McCarthy: Not necessarily.

Yepsen: So, you would exempt those?

McCarthy: What we're thinking about doing is reclassifying the use tax. This is part of the open discussion but you don't necessarily have to have it. You could exempt out the use tax so it doesn't go up and there is no net tax increase.

Yepsen: And what guarantee can you offer the people of Iowa that if they go along with turning the local option sales tax into a statewide sales tax for schools that two years down the road you aren't going to be spending it for something else?

McCarthy: That's why we have to work in a bipartisan way to dedicate the money to school infrastructure and what I have said to some people who have said they have supported us in the past -- I read an article in the paper this morning -- Christopher Rants has filed a silo bill and he said, well I'm not for it this time because I'm not convinced the money won't be scooped. I said, well let's look at your version, then. Maybe we'll enact your version.

Yepsen: Excuse me, no legislature can bind a future legislature. You can sit here and say oh, we don't want to spend it on anything but school infrastructure and four years from now your successors say oh yeah, but we've got to pay for prisons or feed hungry children. What guarantee can this legislature make that it's going to go for school infrastructure?

McCarthy: Well, the only guarantee that you can really, truly give is the language you put in the statute, the language you put in the code. That's true of any issue of any budget item as we move forward.

Glover: Let's go to health care. A special commission has come up with a package of healthcare reforms that boils down to taking the people who are currently eligible for the Hawkeye program, subsidized health care for the working poor, and paying for those who are eligible but aren't currently being covered. Does the legislation go beyond that or is that as far as you can reach this time?

McCarthy: That's probably the most that will be on the table this year, to be frank with you. Here's why. I'm not going to give you a diatribe of last year's session but last year's session, especially with the road to health care, really ties into this coming session. We campaigned on a set of three categories basically. We campaigned on increasing future pay for 42nd and 25th, we campaigned on expanding access to early childhood education, making higher college more affordable, the lowest tuition increase in a quarter century now coming up for this next year, expanding health care coverage and we did that last year to 17,000 Iowans using proceeds from the cigarette tax and making the start of a four years commitment to renewable energy. To maintain that progress this year there's not a lot of new dollars left over. What we want to try to do though is be responsible. We have seen past legislatures make a commitment to increase teacher pay and then say, ah, we're not going to maintain that commitment, make a commitment to reduce class sizes, ah, we're not going to maintain that commitment. We want to maintain the progress we made last year because that's what we campaigned on, we're going to take it to the voters, say here's what we campaigned on, here's what we did the first session, we maintained the progress the second session and we did it in a fiscally responsible way, it's up to your voters whether you want to re-elect us or not.

Glover: And so the idea of universal health care, expanding health care to every Iowan is not going to happen this year?

McCarthy: I think it's going to happen long-term, I think it's a long-term goal and I think the commission needs to be applauded for the great work they've done but the money, the dollars are just not going to be there to do that for the global reach this year.

Glover: Is that a state issue or a federal issue? Does the federal government have to come in and do that?

McCarthy: Well, it could become a federal issue. Heck, all the presidential campaigns have very comprehensive programs. If there is a Democrat that is elected president and the Congress remains Democratic you'll largely see the federal government step in to defray that issue and I think they should. But we'll see what happens.

Yepsen: Another hot issue that has vexed the legislature in the past called fair share, that non-union members in organized shops should be required to pay some sort of fee for the services that the union provides them. What is going to happen with that issue?

McCarthy: I don't know, to be honest with you. It's something that if there is 51 votes for it's something we would have a discussion on and have a debate on. But the votes were not there to do that last year, as you're aware, in large part because I think it was kind of the ebb and flow and push and pull of the change in control. 42 years Democrats have been out of control, working men and women unions have been strong partners of Democrats and they were given control and issues that have been controversial -- I was watching C-SPAN after Mitt Romney gave his religious speech and they showed John F. Kennedy's speech to the Southern Baptists and low and behold one of the ministers got up and asked him about the right to work and fair share. This was several decades ago. So, this issue and this controversy has been around for a long, long time, it will continue to be around. But it is complicated but we're not going to be repealing Iowa's right to work law. Our statute, we only have authority as a state to have that statute, Chapter 731 which is way over here, because of the federal government's Taft-Hartley Act and the Taft-Hartley and national right to work explicitly say that this act and these statutes do not apply to public sector relationships. And the discussion we were having last year was not Chapter 731, was not private sector which is way over here, it was 600 and some code sections away in Chapter 20, public sector ...

Yepsen: So, we have right to work for the private sector but we don't have right to work for public employees?

McCarthy: Well, the statute does not apply to the public sector employees. We have Chapter 20.8 which restricts agency fees for services that non-members receive. So, it was Chapter 20.8 that we were looking at last year.

Glover: Let's take a big picture look at the economy. There are a lot of suggestions that the nation and the state may be heading into a recession. A, is there anything the legislature can do to try to head that off? And B, is there anything the legislature can do to pad the state to protect it from the effects of the recession?

McCarthy: I think we're doing it. We may have a buffer zone here in Iowa. I think the trend is looking somewhat bleak nationwide, don't know how that's going to affect Iowa, obviously the economy does not necessarily know borders. But our agricultural economy is experiencing such productivity right now, such growth in large part fueled because of California doing away with MTBE's, if I got that right, and the increase in our ethanol sales here. Last year we became, for the first time, a net exporter of energy in Iowa because of ethanol. So, that agricultural economy may act as a buffer and I'm hopeful that it does to what is looking like a trend in the rest of the country.

Glover: So, you don't need to do anything to head off the recession?

McCarthy: You need to invest in renewable energy and alternative fuels to try to create high tech highway jobs, all these wind mills that are coming into the state to produce energy we're getting a lot of jobs here because of this kind of new direction in renewable energy.

Yepsen: Because the economy is shaky the Governor is suggesting that the budget can't grow so much. How much will the legislature increase the state budget?

McCarthy: My prediction is, and it's just a prediction at this stage, probably about the same percentage that increased the year before the Democrats took control, I don't remember the exact amount, somewhere around six percent to seven percent. That's about what you need to maintain the progress we started last year. Keep in mind on this budget discussion the single biggest growth in our budget last year was actually new revenue generated from the cigarette tax to expand health care. And so when you look at that you just can't do an apples to oranges comparison to say it grew by X amount because we brought in new revenue.

Yepsen: The state can afford a six to seven percent increase in the state budget?

McCarthy: Yeah, let me tell you something about the budget because it's highly complicated but just to educate folks a bit vis a vis what is common terminology at the federal level. The federal budget runs a deficit every year. The federal government has significant debt. The federal government has no surplus. The state of Iowa budget has no deficit. The state of Iowa has no debt. The state of Iowa has a 600 million dollar surplus in the form of our savings account, the rainy day funds. We also have an ending balance coming into this year over 100 million dollars and two weeks ago we found out it's going to pick up another 8 million dollars. We have the money to do, it's a question of priorities, but we have the money to do what we need to do in this state and we're incredibly fiscally responsible.

Glover: Let's switch gears and go to politics for a second. First of all let's start with presidential politics. You are a fan of Joe Biden in the Democratic primary and he's not around any more. Where are you and where is the Democratic presidential race right now?

McCarthy: Well, the Democratic presidential race is kind of like the Republican presidential race, it's going to be fascinating to watch, it's wide open. I tell you what, I'll give praise to the Des Moines Register because of all these polls that came out at the end it was basically Selzer and Company that had it right, the tsunami turnout during the Iowa caucuses, I think it's going to be -- let me just take presidential politics and bring it down a little bit more local here -- I had over I think 165 new people register into my precinct as Democrats. And that happened all across the state of Iowa. I hope that they stay with the party. But even if not all of them do we're experiencing somewhat of a sea change in our electorate in Iowa and so I think it spells good news for House Democrats. Nationally I'm going to watch and see what happens vis a vis Hillary Clinton versus Barack Obama. I hope whichever one becomes the nominee that they give Joe Biden a good look for Secretary of State.

Glover: You're going to just sit it out and see who gets the nomination and be cool with that person?

McCarthy: That's right.

Yepsen: Some people suggest -- particularly on the Clinton campaign -- are suggested that Barack Obama brought people into the state, that there were illegal voter registrations. Did you see any of that?

McCarthy: No, what I saw is that people who rarely vote and are rarely politically engaged in my precinct they were there and they turned out. Our neighborhood where I vote is Easter Lake area and I recognized most people in the Clinton camp and the Edwards camp and the Richardson camp and the Biden camp but I looked over to the Obama camp and I recognized some folks but they're not regular caucus-goers. This was a huge turnout that really engaged people who otherwise have been turned off from the process and that is to his credit. He talks about hope but there's a lot of people I think who are kind of sick and tired of the same old way of doing things ...

Glover: We only have a little bit of time left but one of the hottest races in the state this year will be the fight to keep the Iowa House. Can you keep control of the Iowa House? And can you expand your majority?

McCarthy: I think we're going to pick up seats. We are continuing to do the same thing we do every year. Remember, just a couple of years ago Republicans had a great year in Iowa, Bush won Iowa, we still picked up three seats down ballot with House Democrats. And I've said this before, we're kind of like the Rodney Dangerfield of Iowa politics, no one gives the House Democrats any respect politically but we continue to do the job every single cycle picking up seats. We're recruiting great candidates, we're going to fully fund them and we're going to pick up seats.

Glover: Ed Fallon is challenging Leonard Boswell in the Congressional primary in your district. Who do you support?

McCarthy: Congressman Boswell. I think if you support the Democratic Party one of the things that the baseline, disagreements, but yet unless you do something very treacherous you support your incumbents. That's what you do as a Democratic Party member. You support people like Al Gore, for example, and Ralph Nader.

Borg: We're out of time. Thanks so much.

McCarthy: Okay, thank you.

Borg: On our next edition of Iowa Press perspective from the executive branch, Governor Chet Culver elaborating on his Condition of the State address and the vision for Iowa. You'll see the conversation with Governor Culver at the usual times, 7:30 Friday night, 11:30 Sunday morning. And a program note too about Governor Culver this coming week, as we mentioned the Condition of the State address to a joint session of the House and Senate is at 10:00 Tuesday morning. You'd expect us to be there and we will, you'll see the Governor's address on Iowa Public Television as he speaks beginning at 10:00 Tuesday. We'll re-broadcast that Condition of the State address at 7:00 Tuesday night. I hope you'll watch. I'm Dean Borg. Thanks for joining us today.

Archive editions of Iowa Press can be accessed on the worldwide Web. Audio and video streaming is available as are transcripts at www.iptv.org.

Funding for Iowa Press was provided by Friends, the Iowa Public Television Foundation; the Iowa Bankers Association for personal, business and commercial needs. Iowa Banks help Iowans reach their financial goals; and by the Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure; by PolicyWorks, a public and government affairs team offering lobbying, grassroots and advocacy services to help you meet your strategic public policy needs. Information is available on the Web at www.policyworksllc.com; by Iowa's private colleges and universities, enrolling 25% of the Iowa higher education enrollment and conferring 44% of the baccalaureate and 40% of the graduate degrees in the state. More information is available at www.thinkindependently.com.